KazCham

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Kazakhstan’s senate has approved the Asian Infrastructure Investment Bank agreement that defines the country’s $729.3 million share in the bank’s capital, as many anticipate the AIIB becoming a rival to the World Bank and Asian Development Bank within the region. In Uzbekistan, $843.8 million from its Fund for Reconstruction and Development is set to be allocated to the implementation of 27 projects included in the 2016 state investment programme, and the country is also set to use over $4 billion in foreign investments in 2016, with the lion’s share of these funds allocated to the fuel and energy sector. Meanwhile in Iran, electricity generation projects worth $30 billion are due to the opened up to foreign investors.

 

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The government of Kazakhstan has approved a list of state companies to be offered for privatisation as part of its long-term privatisation plan for 2016-2020.

The plan approves a list of large state-owned companies and organisations that will be privatised, and includes the pharmaceutical company SK-Pharmacy, national space company Kazakhstan Garysh Sapary, state road enterprise Kazakhavtodor, Khorgos international centre of cross-border cooperation, the airport of Astana, the Almaty sanatorium, the Kazakh national film studio, the airports of Kostanai and Petropavlovsk, the Korkyt Ata airport in Kyzylorda, and the Duman entertainment centre in Astana.

The list for priority privatisation also includes the national railway company Kazakhstan Temir Zholy (through IPO), national oil and gas company KazMunayGas (IPO), national atomic company Kazatomprom (IPO), national post service Kazpost (IPO), airlines Air Astana (IPO) and Qazaq Air, national telecommunications operator Kazakhtelecom, the airports of Aktobe, Atyrau and Pavlodar, the Aktau international seaport, and the national agricultural holding KazAgro.

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Kazakhstan plans to borrow $1 billion each from the Asian Development Bank (ADB) and the World Bank in order to finance its 2016 state budget deficit.

Kazakhstan’s parliament passed the budget last month, with an estimated deficit of 723.4 billion tenge ($2.2 billion).

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Samruk-Kazyna, the sovereign wealth fund of the Republic of Kazakhstan, has announced memorandums of understanding and agreements for five projects totalling $4 billion at the meeting of the Kazakhstan-China Business Council (KCBC).

The event was attended by more than 350 representatives from governments and businesses from both countries and included keynote remarks from Kazakhstan’s Prime Minister Karim Massimov and Samruk-Kazyna’s CEO Umirzak Shukeyev.

Key announcements at the KCBC meeting included:

• Agreement between KazMunayGas and Sinopec in oil exploration and production, petrochemicals, engineering and renewable energy.
• Agreement between Kazakhstan’s national atomic company, Kazatomprom, and China General Nuclear Power for the design and construction of a plant for the production of fuel assemblies in Kazakhstan and the joint development of uranium deposits in Kazakhstan.
• Agreement between Kazakhstelecom and China Telecom to roll out fibre optic communications lines in rural Kazakhstan.

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The $40 billion “Silk Road” fund, set up last year to boost connectivity across Asia, has agreed to contribute $2 billion to a new investment fund to support “capacity cooperation” with Kazakhstan.

China has been trying to promote similar cooperation with other countries, under which local firms export some of their huge production capacity as they build infrastructure and factories overseas.

Chinese Premier Li Keqiang held talks with his Kazakh counterpart Karim Massimov in Beijing on Monday, vowing to step up bilateral cooperation in industrial capacity, agricultural products, energy and regional connectivity.

PwC Kazakhstan

·           a gradual introduction of obligatory electronic invoices: during 2016 — for certain types of taxpayers, from 2017 — for all VAT payers. Violation of electronic invoicing requirements could result in an administrative fine for large taxpayers up to 80% of the VAT stated in the invoice’s hard copy (but not less than 40 MCI, approximately KZT 85 thousand);

·           transfer of goods from KZ to another member state of the Customs Union (CU) within the same legal entity shall be non VAT-able turnover.  Similarly goods, imported from another member state of the CU within the same legal entity shall not be subject to import VAT;

·   new provisions on VAT refunds for taxpayers who have excess VAT receivable accumulated during the period of geological exploration and field development;

·           a clarification on turnovers, which are not turnovers of commissioner under agency and commission  contracts, as well as clarification on the order of invoicing under a commission contract;

·   a cancellation of voluntary VAT registration from 2017;

·           a reduction of the annual turnover threshold for mandatory VAT registration up to 3 234 MCI (about KZT 7 mln);

·           new requirements for VAT registration;

·           a transition to electronic VAT registration certificate from 1 April 2016;

·   prolongation of import VAT payment by offset mechanism on import of certain goods till 2022.

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The Kazakh National Holding KazAgro plans to attract $2 billion in funds from the World Bank for 35 years for lending to the agro-industrial complex, according to the Chairman of the National Holding Nurlybek Malelov.

According to the chairman, the loan will provide a twofold increase in lending to the agricultural sector, without attracting funds from the budget.

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Central Asia’s largest transport and logistics centre has been launched in Astana, Kazakhstan.

The country’s railway operator, Kazakhstan Railways, has said that the centre will provide integrated storage services with a full cycle of multi-modal logistics.

Transport and logistics centres will also be built in other major cities in Kazakhstan, such as Aktobe, Pavlodar, Almaty, Uralsk, Atyrau, Kostanai and Semey as part of a programme to create external and internal terminal networks.

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In a major legislative development, Kazakhstan is implementing a new law on public-private partnerships. As such, our team has prepared an extended overview of the major aspects of this new law, which is due to enter into force next week on 23 November 2015.

Kazakhstan’s President Nazarbayev has signed the Law “On Public-Private Partnership” (the “Law”) which provides for the conditions of cooperation between the state and private businesses in Kazakhstan. The law is aimed at ensuring the country’s sustainable social and economic development and will enter into force on 23 November 2015.

The Law regulates the main approaches and phases for the implementation of public-private partnership (PPP) projects, and outlines the challenges, principles and defining characteristics of PPPs. It also provides guarantees for the rights and interests of the participants of PPPs, the forms of their participation in projects and the means of state support.

The participants of PPPs include: (i) the state (ii) entrepreneurs and (iii) financial organisations that provide project financing. The Law stipulates the conditions for sources of financing for PPP projects, the reimbursement of expenses to subjects and income generation.

The Law also stipulates that a private partner may be selected on the basis of (i)a tender or (ii) direct discussions. It also defines the qualification requirements that a potential private partner must satisfy in order to participate in a tender process, the conditions for a tender process and the procedure for the conclusion of PPP agreements.

Specifically, the new definitions include the following:

• “Private partner” – a sole entrepreneur, partnership, consortium or legal entity, except for persons acting as public partners in accordance with the Law, entered into a public-private partnership agreement;
• “Public partner” – the Republic of Kazakhstan, on behalf of which the Government of the Republic of Kazakhstan or local executive body of the region, city of republican status and the capital, as well as their other authorised state authorities and subjects of quasi-public sector, 50% and more of voting shares (interests in the charter capital) of which are directly or indirectly owned by the state, concluded a public-private partnership agreement;
• “Public-private partnerships” – a form of cooperation between the public and private partners corresponding to the characteristics defined in the Law;
• “Direct agreement” – a written agreement between the public partner, private partner and creditor of a private partner for the implementation of a public-private partnership project of special importance.

In addition, President Nazarbayev has signed the Law “On amendments and additions to some legislative acts of the Republic of Kazakhstan as to the public-private partnership”. The purpose of this legislative act is to bring current Kazakh legislation into compliance with the new Law.

This Law is also aimed at implementing some of the “100 Concrete Steps” and regulates the issues involved in attracting investment for the construction of infrastructure for the Kazakh population.

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The Samruk Kazyna, Baiterek and KazAgro national holdings will be featured in the new privatisation programme, after which they will either be transformed into lean organisations or liquidated, according to the Kazakh President Nursultan Nazarbayev.

The assets of the Samruk-Kazyna national welfare fund include: the KazMunaiGas national oil and gas company, the Kazakhstan Temir Zholy railway operator, Kazakhstan Electricity Grid Operating Company (KEGOC), Kazakhtelecom telecommunications operator, and the Kazatomprom national nuclear company.

The Baiterek national management holding includes: JSC Development Bank of Kazakhstan, JSC Investment Fund of Kazakhstan, JSC Housing Construction and Savings Bank, JSC Kazakhstan Mortgage Company, JSC KazExportGarant, JSC Entrepreneurship Development Fund Damu, JSC National Agency for Technological Development, JSC Kazakh Fund of Mortgage Guarantees, JSC Kazyna Capital Management, JSC Baiterek Development, and JSC Public Private Partnership Advisory Center.

The KazAgro National management holding includes: the National company Food Contract Corporation JSC, KazAgroProduct JSC, KazAgroFinance JSC, Agrarian credit corporation JSC, Fund for Financial Support of Agriculture JSC, KazAgroGarant JSC and Kazagromarketing JSC.